Recovery Propels Growth For Qualified Institutional Placement (QIP) Funding: ASSOCHAM

Corporate India recorded an increase of over 14 times in their preference for Qualified Institutional Placement (QIP) between calendar year 2008 and 2009 since economic recession eased off and new instrument established its popularity as a great source of funding, say a joint study of SMC capitals and ASSOCHAM released on June 28, 2010.

According to it, as many as 45 companies including names like Axis Bank, Unitech, HCL Infosystems, Punj Lloyd and L & T made QIPs in 2009 with a total issue size of Rs 32,631 crore as against just 4 companies that made QIPs in 2008 with a total issue size of Rs 2104.43 crore.



However, the study name “Qualified Institutional Placement (QIP)” reveals that in 2010 Year to Date (YTD), 11 companies have made QIPs with an issue size of Rs 4298.28 crore with BFSI (Banking, Financial Instruments and Insurance) taking lead in the pack, the study titled “QIC-the flavor of the corporate world” revealed adding that 50 companies were already in the QIP pipeline with valid board resolutions in hand, said ASSOCHAM President Dr. Swati Piramal.

Domestic corporate went through a period of cash-flow crunch in the backdrop of global meltdown of year 2008, which lasted upto first quarter of calendar year 2009. However once the recovery commenced from April 2009, the QIP instrument proved to be of a great source of funding for Indian corporates

The study paper has credited SEBI for creating a highly flexible, timely and effective instrument that is equipped with relatively simple regulatory requirements, beneficial to the issuing companies and investors at large.

In comparison to an IPO, FPO or any other fund raising mode which take about four to five months, in the case of QIP, everything can be wrapped up in a matter of four-five days. Besides with QIP, investors get guaranteed allotment with no lock-in period and a pricing that is simply the average of the last 2 weeks, said Mr Subhash Chand Aggarwal, chairman and MD of SMC capital.



ASSOCHAM president, however, pointed out that SEBI’s proactive approach introduced the QIP process in 2006 to prevent listed companies in India from developing an excessive dependence on foreign capital and in the process created a very useful and time effective instrument that made capital investment and capacity build up a much easier task.

Mr Jagannadham Thunuguntla of SMC Capitals said that staggering amounts raised by Indian corporates via QIP underlines the significance this instrument has gained within a short span of three years, since the concept was commenced in May 2006.

Through QIP, companies can get cash from a few large investors called QIBs (Qualified Institutional Buyers) which are generally large institutional investors who have the expertise to evaluate market offerings and invest large amounts. SEBI, our market regulator has given elaborate directions on who are eligible to qualify as a QIB.

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